2015 (11) TMI 53 - AT - Service Tax

Refund - Input services - Nexus with export of services - Business Auxiliary Service, Business Support Service, Management consultant and information technology software service - Held that - There is no dispute even by the Original authority as well as the Commissioner (Appeals) that all these services covered under the definition of input services therefore Cenvat Credit is admissible. However, the refund was rejected on the said services on the ground that appellant could not establish nexus of these services with output services. In this regard, I am of the view that since, except small part for which no refund claim was filed, entire services have been undisputedly exported; no one to one co-relation is required to be proved. When entire services have been exported then it cannot be said that nexus of input services with the output services is not established. Nature of amount received against reimbursement of expenses - Held that - it is like export value devided into parts one, value of the software and part two on account of reimbursement; however there is no dispute that both the amounts have been realized in convertible foreign exchange. The reimbursement cannot be treated in isolation but is very much in connection with the export of services. Therefore in my view refund of the service tax on reimbursement which has been realized by the appellant from Foreign Service recipient in convertible foreign is admissible. - Matter remanded back - Impugned order is aside - Decided in favour of assessee.

Summary

Issues Involved:
1. Nexus of input services with output services exported.
2. Rejection of refund claims based on certain invoices and reimbursement of expenses.
3. Telecommunication services used for personal purposes.

Issue-wise Detailed Analysis:

1. Nexus of Input Services with Output Services Exported:

The appellant, M/s. Ness Technologies (India) Private Limited, filed refund claims for Cenvat Credit on input services used in providing output services, which were exported. The Commissioner (Appeals) upheld the rejection of these claims on the grounds that there was no direct nexus between the input services and the output services exported. The appellant argued that services such as Professional Consultancy fees, Chartered Accountant fees, Telephone charges, rent charges, Internet communication services, Repairs & Maintenance, Cleaning & Housekeeping, Security, Manpower Recruitment & Supply services, Information Technology, rent-a-cab, commercial Training & Coaching Services, computer network services, Information Technology Software services, Telecommunication, and scientific & Technical consultancy services are covered within the definition of input services under Rule 2(l)(i) of the Cenvat Credit Rules, 2004. The Tribunal noted that the Commissioner (Appeals) had acknowledged these services as input services but rejected the refund on the basis of the alleged lack of nexus with the output services. The Tribunal held that since almost 100% of the services were exported, the need to establish a direct nexus was unnecessary. The Tribunal concluded that the rejection of the refund claim on these grounds was incorrect.

2. Rejection of Refund Claims Based on Certain Invoices and Reimbursement of Expenses:

The Commissioner (Appeals) also rejected part of the refund claims on the grounds that certain invoices were not related to the output services exported and were for personal use or pertained to an earlier period. Additionally, the Commissioner (Appeals) contended that reimbursement charges should not be part of the gross amount of taxable service. The appellant argued that the reimbursement of expenses was part of the export value realized in convertible foreign exchange and should be considered for refund. The Tribunal observed that the appellant's contract with the foreign service recipient included a clause for reimbursement of expenses, which was part of the export value. The Tribunal held that the reimbursement of expenses was in connection with the export of services and should be eligible for a refund. The Tribunal found that the judgment in the case of Bhagwati Traders was not relevant to the present case as it did not pertain to export and refund issues.

3. Telecommunication Services Used for Personal Purposes:

The Commissioner (Appeals) rejected the refund claim for telecommunication services on the grounds that the services were used for personal purposes by the employees, as the invoices were in the names of the employees. The appellant contended that the telecommunication services were used for business activities and the invoices, though in the names of employees, also mentioned the company's name. The Tribunal agreed with the appellant, noting that the telecommunication services were paid for by the company and booked as an expenditure in the company's accounts. The Tribunal held that the telecommunication services were used for business activities related to the export of software technology services and were therefore eligible for a refund.

Conclusion:

The Tribunal set aside the order of the Commissioner (Appeals) and remanded the matter to the original adjudicating authority to pass a fresh order, taking into account the Tribunal's observations. The adjudicating authority was directed to dispose of the refund claims within three months from the date of receipt of the order.